United States v. Dennis Kaun

827 F.2d 1144
CourtCourt of Appeals for the Seventh Circuit
DecidedOctober 21, 1987
Docket86-1926
StatusPublished
Cited by81 cases

This text of 827 F.2d 1144 (United States v. Dennis Kaun) is published on Counsel Stack Legal Research, covering Court of Appeals for the Seventh Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
United States v. Dennis Kaun, 827 F.2d 1144 (7th Cir. 1987).

Opinions

FLAUM, Circuit Judge.

Dennis Kaun, a tax protester, appeals from the district court’s entry of a permanent injunction against him pursuant to sections 7402(a) and 7408 of the Internal Revenue Code. Among other things, the injunction prohibits Kaun from inciting others to submit tax returns based on certain false and fraudulent income tax theories, and from advertising or marketing materials based on these theories under the guise of tax advice. Kaun argues that the district court had no statutory authority to enter an injunction against him. He also argues that the injunction is void because it is based on clearly erroneous findings of fact, because it impermissibly restricts his freedom of speech and freedom of expression, and because it is vague and over-broad. We reject these claims, and affirm the judgment of the district court.

I.

Because the district court’s opinion in this case is reported, see United States v. Kaun, 633 F.Supp. 406 (E.D.Wis.1986), we set forth only those facts necessary to an understanding of the issues on appeal.

Kaun is the unofficial leader of a tax protester group known as the Wisconsin Society for Educated Citizens (“WSEC”). The WSEC is formally affiliated with the American Society for Educated Citizens, and informally affiliated with a number of similar groups across the country.

In early 1984, Special Agents Thomas Walkner and Lynn Griffin of the Internal Revenue Service, posing as husband and wife, became members of the WSEC and attended about 14 meetings. At that time, the WSEC held weekly two and a half hour meetings in Elm Grove, Wisconsin, with a usual attendance of 60 to 75 people. New members were encouraged to join the “constitutional class,” which involved listening to as much as 90 hours of presentations [1146]*1146and cassette tapes on issues of constitutional law. Regular members discussed topics such as the First Amendment, the Freedom of Information Act, driver’s licenses, and land patents.

The most popular topic of discussion among the regular WSEC membership, however, was the corruption of the internal revenue system, and the ways in which taxpayers could obstruct the workings of the Internal Revenue Service. For example, according to the trial testimony of Agents Walkner and Griffin, Kaun encouraged WSEC members to send the IRS as many Freedom of Information Act requests as possible, in order to “bog down” the IRS. Kaun also discussed requesting injunctions against employers to prevent them from requiring their employees to fill out W-4 forms. Agent Walkner testified that the WSEC sponsored a videotape presentation on the subject of filing common law liens against IRS personnel, and that he knew of at least three WSEC members who subsequently filed such liens.

As a result of information gained through the IRS agents’ infiltration, on May 23,1984, the United States filed suit in federal district court, requesting injunctive relief against Kaun because he was the promoter of an “abusive tax shelter,” and because Kaun was impeding the enforcement of the internal revenue laws. The district court granted the government’s motions for an expedited hearing, and for consolidation of the expedited hearing and the trial on the merits.

At trial, the main evidence against Kaun was the direct testimony of Special Agents Walkner and Griffin; tape recordings of WSEC meetings made by the agents; forms printed on the WSEC word processor; and various pamphlets and information kits that were offered for sale at each meeting. Kaun, who represented himself at the trial, argued that the government had insufficient evidence of any misconduct on his part.

On April 9, 1986, the district court entered a permanent injunction against Dennis Kaun pursuant to § 7402(a) and § 7408 of the Internal Revenue Code, 26 U.S.C. § 7402(a) (1982) and 26 U.S.C. § 7408 (1982 & Supp.1985). Under the injunction, Kaun may not, among other things, encourage others to file returns based on certain false and fraudulent theories about the tax system, or advertise or sell materials based on these theories under the guise of tax advice.1 Kaun filed a timely notice of appeal.

[1147]*1147II.

On appeal, Kaun, still representing himself, raises a great many issues, some frivolous and some of substance. Bearing in mind our duty to hold pleadings drafted by persons untrained in the law to “less stringent standards than formal pleadings drafted by lawyers,” Haines v. Kerner, 404 U.S. 519, 520, 92 S.Ct. 594, 596, 30 L.Ed.2d 652 (1972) (per curiam), we read his appeal to involve three major claims. First, Kaun argues that the district court had no authority under either I.R.C. § 7402(a) or § 7408 to enter an injunction against him. Second, Kaun argues that even if the district court had statutory authority to grant an injunction, this injunction is void because it was based on clearly erroneous factual findings. Finally, Kaun argues that the injunction intolerably burdens his First Amendment rights to freedom of expression and freedom of association, and is impermissibly vague and over-broad. We reject these claims, and affirm the judgment of the district court.

III.

Kaun first argues that the injunction is void because the court had no statutory authority to proscribe his conduct. The district court based its injunction against Kaun on two statutes: I.R.C. § 7408 and, in the alternative, I.R.C. § 7402(a). We conclude that the injunction against Kaun was proper under § 7408. We therefore need not consider whether the district court’s action was also proper under § 7402(a), which authorizes a district court, at the request of the United States, to issue such injunctions and other judgments and decrees “as may be necessary or appropriate for the enforcement of the internal revenue laws,” I.R.C. § 7402(a) (1982).

Section 7408 authorizes the United States to seek injunctive relief against persons found to be in violation of I.R.C. § 6700. Thus, the injunction against Kaun was properly based on § 7408 if Kaun’s activities fell within the scope of § 6700.

Sections 6700 and 7408 of the Internal Revenue Code were added to the Code by the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”), Pub.L. No. 97-248, 96 Stat. 324. Section 6700, titled “Promoting abusive tax shelters,” contains two elements that the government must prove: (1) that the defendant was involved in an abusive tax shelter, and (2) that the defendant made statements about the tax benefits investors would receive if they participated in the shelter which the defendant knew or had reason to know were false or fraudulent.2 We conclude that Kaun’s tax protest activities fell within the scope of § 6700.

TEFRA defines an abusive tax shelter as a partnership or other entity, any investment plan or arrangement, or any other plan or arrangement, whose “principal purpose ... is the avoidance or evasion of federal income tax.” I.R.C. § 6661(b)(2)(C)(ii) (1982 & Supp.1985). The government argues that under this broad definition the WSEC can be considered a tax avoidance scheme within the meaning of § 6700, and that Kaun is therefore liable as a promoter of the scheme.

[1148]

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Bluebook (online)
827 F.2d 1144, Counsel Stack Legal Research, https://law.counselstack.com/opinion/united-states-v-dennis-kaun-ca7-1987.